MDA posts solid first post-IPO results

MDA's first post-IPO results show the company's geospatial intelligence business helping to boost its quarterly revenue more than 15 percent year-over-year, despite a turbulent market entrance early in Q2. MDA's quarterly revenue was $126.7 million, with geointelligence revenue contributing roughly 38% ($48.2 million) of that figure. More sales of satellite imagery and analytics services boosted overall geointelligence revenue to $97.2 million on a year-to-date basis (to June 30), up 6.5% from a year ago. Overall, the company's quarterly net loss was $0.1 million – an improvement of $9 million over last year – and MDA has already hired more than 435 new employees in the first two quarters of 2021, compared to 350 people in all of 2020. (MDA's total employee base is between 2,200 and 2,300 people, officials said.) In geointelligence, key customers for the quarter renewed their contracts, included the Canadian Space Agency and the National Oceanic and Atmospheric Administration (NOAA). MDA has been selling multi-source ground stations this quarter to large defense and intelligence customers, as well as other government and commercial customers around the world, noted CEO Mike Greenley in a conference call with investors Wednesday (Aug. 11). "Those customers have strong analytic centers to operate their own ground stations in their geointelligence work streams, to be able to pull down data from our Radarsat2 satellite and then up to 20 other different satellites," he said. MDA is looking at various options for upgrading its fixed-infrastructure ground stations and on-premise ground stations along with its partners, Greenley noted. The company also plans a "ground station offering in the cloud so that we can offer infrastructure as a service in the future." Greenley said that the trend for capital investment in space shows an increase, with Space Capital (a venture capital fund) estimating that US $4.5 billion (CAD $5.63 billion) was poured into new capital in Q2. Greenley said 2021 overall has been a record year for such spending. "This level of investment is effectively opening the funding tap for new missions, and is a direct indicator of downstream market opportunity for MDA," he told investors. "Our customers' programs are capital intensive by nature, and the level of investment we are seeing means they can move forward with key projects. As a company that provides advanced technologies that enables those programs, it is also building MDA's opportunity pipeline." A turbulent stock market meant MDA initially raised about $400 million Canadian in its March 31 IPO, about 20 percent below the targeted amount as sales did not meet the company's expectations. MDA planned to raise $500 million by selling shares for $16 to $20 each, but the final result saw 28.6 million shares sold for $14 apiece. MDA started listing on the TSX April 7. An over-allotment option exercised later in April boosted total IPO proceeds to $460 million. MDA used the IPO proceeds to repay a $419 million term loan, the company reported in its Q2 results, and that cleared the way for the company to focus on revenue generation, Greenley said. "With our IPO successfully completed very early in the quarter, we were able to hit the ground running in Q2 and turn our focus to program and operational execution, with double-digit revenue growth," he told investments. Robotics and space operations brought much of the MDA media attention in recent months, thanks to ongoing announcements related to the Canadarm3 program – a robotic arm being constructed for NASA's Gateway lunar space station. It may be that robotics has a larger contribution in Q3, however, given that the latest Canadarm3 contract was awarded post-quarter end and that the robotic arm has been the main driver for robotic revenues throughout the year to date. In late July, MDA announced a $35.3 million design contract from CSA to design the Gateway External Robotics Interfaces (GERI). MDA completed Phase A of the GERI project earlier this year, and the new contract covers Phases B and C. "It's a much larger phase; obviously each of the phases builds," Greenley said of the new contract, compared with the older one. By comparison, Q2 revenue in robotics – which did not include this Canadarm3 contract – was a nearly identical amount to the contract at $35.6 million, up nearly 11 percent from Q2 2020. One of the key Q2 contracts was an early-stage study from the European Space Agency, which is building the Moonlight satellite communications system for lunar exploration and the Artemis program, MDA said. "In conjunction with the Moonlight system, MDA also received a separate satellites subsystems contract for the Lunar Pathfinder mission, supporting a mission to launch the first commercial lunar data relay satellite that will orbit around the moon, beginning in 2024," Greenley said during the conference call with investors. Q2 satellite systems revenue also increased roughly 41% year-over-year, to $42.9 million. A basketful of contracts contributed to the bottom line, including deals with Airbus (the OneSat digital software-defined satellite line); L3Harris Technologies and Lockheed Martin (for the Space Development Agency's Tranche 0 element of its wide-field-of-view vehicles); and the U.S. government (NASA's Space Weather Follow-On L1 or SWFO-L1 mission to track solar activity, in collaboration with NOAA). Greenley pointed to expected growth in the satellite systems line as the Telesat Lightspeed broadband satellite constellation evolves for a scheduled first launch in 2023. MDA is developing a key subsystem – the satellites' direct radiating array, which is an electronically steered multi-beam antenna. "Lightspeed is the big thing to follow," Greenley said. He added, "As the entire project transitions from early levels of funding – that we're all working on right now – into a fully funded, more accelerated program, that's the key milestone to watch for." Things to watch for in future quarters include the follow-up to a February announcement from MDA, which noted the company is in "advanced discussions with Thales Alenia Space for the Lightspeed satellites' final assembly and manufacturing in Quebec." Two major post-Q2 announcements for Lightspeed also came in this month, when Ontario announced it would spend $109 million to contribute to Lightspeed and the federal government announced a $1.44 billion investment yesterday. Greenley also pointed to MDA's plans to make "disciplined investments in strategic and affordable opportunities we feel will bring value to MDA, and to our shareholders." One Q2 example was a $6 million investment in Seraphim Space Investment Trust, a U.K.-based venture capital firm. "Our small, but strategic position enables MDA to more closely identify and track the global pipeline of space startups, which can potentially be leveraged into our own ecosystem and supply chain. It also provides early insight of potential future investment opportunities," Greenley said.